AdvisorTech Lands Big Money From Big Investors

$125 million in the second round of financing? Wow, must be a pretty good idea. Well, that's exactly what Advisor-Tech has done, landing the largest private placement of the first quarter of 2000 with folks like First Union Capital Partners, Chase Capital Partners, Chase H&Q and Morgan Stanley Dean Witter all jumping on board. The weighty names behind AdvisorTech give it creedence-folks like CEO Timothy McCarthy who was formerly president of Charles Schwab among other things, and Mark Wildermuth, former president of Fidelity Brokerage Technologies Group-but there's got to be much more than just that. And there is.

Recognizing the burgeoning market in Asia for mutual funds, or investment trusts as they are officially known in Japan, McCarthy and his team have brought to that market a front-end system that offers investment advisors and institutions with access to a host of funds residing at numerous fund companies in the marketplace. The system also comes with its own proprietary middleware layer that allows it to hook into the back end of any fund company.

"I worked in Asia a lot over the last 25 years particularly through the '90s where I served as chief executive of Jardine Fleming Unit Trust in Hong Kong...and I had to wrestle with getting American systems to fit the Chinese working environment and their character-based systems," McCarthy recalls. "We used to talk about 'Wouldn't it be great to build the the right way for that market rather than trying to take an English-based system and trying to retrofit it.'"

As such, AdvisorTech's system can currently handle Japanese, Korean, English and German, but it is designed so that it can be ported over to any language with relative ease.

To further streamline the process, AdvisorTech provides users proprietary analytics on the funds in its system, and has registered as a broker/dealer so that it can transact on behalf of investment advisors. "Overseas is very different from the U.S. in that you have to do a lot of fundamental analysis of the funds because some of these funds are new, so you can't just rely on pure quantitative analysis," McCarthy explains. "We combine that with a broker/dealer so they can get access to the product without themselves being a broker/dealer."

Pointing out the unrealized opportunities in Japan, alone, McCarthy says that as late as 1995 there were only 4000 people registered with the Japan Association of Financial Planners where today there are over 71,000. That jump is attributable partially to the "Big Bang," which deregulated brokering commissions, but, more importantly, to a 1998 regulatory decision that decoupled broker activities from the underwriter. "That meant, for the first time, that an insurance agent or broker didn't have to be tied to just one underwriter," he explains.

Currently, AdvisorTech has integrated with 16 of the largest fund companies in Japan, and boasts over 200 investment advisors and groups using the system. The firm's next move? South Korea.